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   ANNUAL REPORT
       2005


          Moscow 2006
    oao RbC Information Systems
Table of contents

 4    Chapter I. Address to Shareholders

 8    Chapter II. 2005 Events Calendar

 10   Chapter III. About the Company
               RBC at a glance
               Company structure
               RBC holding structure

 16   Chapter IV. Business Overview
               Macroeconomic situation
               in Russia in 2005
               Russian media market
               in 2005
               Russian IT market in 2005
               RBC’s media business
               RBC’s IT business

 30   Chapter V. Performance Overview for 2005
               Directors’ report
               Development strategy

 36   Chapter VI. Personnel and Social Policy
               Salaries, personnel development and
               corporate culture
               Adaptation programs for newcomers
               Social policy

 40   Chapter VII. For Shareholders and Investors
               RBC’s dividend policy


 44   Chapter VIII. Corporate Governance
               Shareholders’ rights
               Information disclosure
               Executive governing and control bodies
               The Board of Directors and the Executive Board
               Remuneration to members of the Board of
               Directors


      Appendix A.
      Consolidated Financial Statements
Chapter I




                             German Kaplun
                             Chairman of the Board of Directors
                             OAO RBC Information Systems




                             Yuri Rovensky
                             General Director
                             OAO RBC Information Systems




            Dear shareholders,

            We live in a wonderful time when technologies
            change our life every day, enriching it with
            opportunities and experience that were
            unavailable to earlier generations. The media
            industry is changing before our eyes, opening
            new horizons for communication, research and
            access to a broad spectrum of information and
            entertainment sources – at any time, in any
            place, with the help of any device. These global
            trends offer new opportunities to companies
            poised for growth.

            Our goal is to take as full advantage of these
            opportunities as possible. This means that the
            management’s prime aim is to ensure RBC’s
            leading position in media sectors with high
            growth potential for both revenue and profit.
            In the past, the Company successfully used its
            competitive advantages to pursue this strategy,
            and we strongly believe that we will be able to
            do so in future too.
Address to
Shareholders





    The past year was extremely successful for
    RBC. In 2005, our RBC TV business channel
    began generating profit. We think it is a big
    success. The audience of the channel has been
    dynamically increasing, and it continues to
    grow. Unfortunately, we did not fully achieve
    our goals in terms of the distribution of RBC
    TV’s signal, but we hope to basically solve this
    problem in 2006. RBC TV has great potential,
    and we are yet far from our peak growth.

    The Company has retained its leading position
    in Russia’s Internet banner advertising industry,
    accounting for about 47% of the market. RBC
    still has the largest business audience in the
    country. The Company has become more active
    in the area of non-business Internet. Though
    this audience is significantly smaller compared
    with that of Internet portals, we are growing
    much faster. This growth is not just organic, but
    it is also being fed by beneficial acquisitions.

    We expect our Internet business to remain
    one of the largest revenue generators for
    the Company in the next two years, and the
    management will concentrate its efforts in
    this field on increasing RBC’s online audience.
    We will continue to launch new products and
    acquire attractive Internet resources.

    Over the past year the Company prepared a
    solid platform for entry into the print media
    segment, the second largest media segment
    in Russia after television. The management
    believes that RBC’s print media projects are set
    to take the lead among Russian business titles
    very quickly, thanks to the Company’s dominant
    position on the business media market.

    Some of the former Soviet republics have
    significant economic potential, Ukraine and
    Kazakhstan first of all. In 2005, the Company
    began its expansion to the Ukrainian media
    market, and the first results will already be
    seen in 2006. RBC has unique technologies,
    which can be quite easily reproduced on new
    markets. This will allow the Company to speed
    up the process of taking over its market niche
    and quickly achieve high operating margins in
    foreign markets.
                                                     




In the area of information technologies (IT), this
was the year when we reached an agreement
on the acquisition of a large business for the
first time. The Helios Computer company is
expected to bring revenue of between $35
million and $40 million in 2006. This purchase
will almost double RBC’s share of the IT market.
The acquisition of Helios will significantly
expand our client base and strengthen our IT
team with new professionals. We hope that the
united Company will be stronger and more
aggressive, and if we manage to fully utilize all
the synergies, we will achieve much more.

Sincerely yours,

German Kaplun
ChAIRmAn Of the BOARD Of DIReCtORS
OAO RBC InfORmAtIOn SyStemS


Yuri Rovensky
GeneRAl DIReCtOR
OAO RBC InfORmAtIOn SyStemS
Chapter II

             JAnuAry-MArCh                     • RBC wins a tender of the
                                                 Federal State Statistics Service
             • RBC launches the RBC-Real         for the launch of one of the
               Estate information portal         largest distance-learning
                                                 systems in Russia.
             • RBC wins a tender of the
               Russian Federal Education       • RBC delivers strong first
               Agency to implement a             quarter 2005 results: total
               distance education project in     revenue rises 31%.
               several CIS states.             • RBC introduces seminars for
             • RBC named among most              government officials and
               cited brands on the Russian       comes up with a specialized
               Internet in 2004.                 IT solution – the State Portal.
             • RBC presents the QuoteRate      • RBC convenes Annual General
               quote terminal.                   Meeting of shareholders
                                                 (AGM).
             • RBC TV programs broadcast
               on CNBC Europe.                 • RBC ranked 11th in the iOne-
                                                 2004 rating of the leading
             • RBC announces the Person of       software developers on the
               the Year 2004 award winners.      Russian IT market.
             • RBC wins the Business People    • RBC named by The Financial
               2004 award.                       Times among the top 100
             • RBC assigned a higher -Class      Eastern European companies.
               A - corporate governance
               rating by Expert RA.
                                               July-SepTeMber
             • RBC reports strong
               preliminary results for 2004:   • RBC TV audience surges
               total revenue growth exceeds      20% in October 2004 to
               50% for the fourth year           June 2005, according to the
               running.                          independent media research
                                                 company COMCON Media.
             • RBC presents a new product:
               the RBC NewsMonitor             • RBC TV Director Artyom
               terminal.                         Inyutin becomes a winner of
                                                 the Media Manager of Russia
             • RBC launches a Level 1
                                                 2005 award.
               American Depositary Receipt
               program with The Bank of        • RBC reports second quarter
               New York.                         2005 results: revenue rises
                                                 35%.
             AprIl-June                        • RBC ranks among top15
                                                 most liquid Russian
             • RBC presents Mutual               companies, according to
               Investment Funds Database         the Kommersant-Dengi
               with a whole range of             economic weekly.
               information about mutual
               investment funds.               • RBC gets into Russia’s top
                                                 10 companies in the S&P
             • RBC is successfully               Transparency and Disclosure
               audited and receives              Survey.
               the ISO 9001:2000
               compliance certificate
               in the following sphere:
               “Design, Development
               and Implementation of IT
               Solutions” until 2008.
                                  2005 events
                                  Calendar
OCTOber-DeCeMber
• EGM of RBC supports an
  increase in the number of
  authorized shares.
• RBC reaches an agreement to
  acquire controlling stakes in
  Helios Computer and ASKO-
  TBS Consulting.
• RBC announces BEST BRAND/
  EFFIE 2005 award winners.
• RBC TV launches new
  programs.
• RBC presents the Consumer
  Market News business news
  line.
• RBC presents the Currency
  Exchange Forecasts
  specialized product.
• RBC holds its 12th annual
  international business
  conference in South Africa.
• RBC awarded by the Expert
  Rating Agency for success on
  the stock market.
• RBC announces the winners
  of the Company of the Year
  2005 national business award.
• RBC TV receives the Product
  of the Year 2005 award
  from the National Trade
  Association in the category
  “For the Creation of a Unique
  Media Product.”
• RBC named 139th among
  the 500 fastest-growing
  technology companies on
  the Deloitte Technology Fast
  500 EMEA list for 2005.
Chapter III

                  rbC at a Glance

                  Founded in 1993 as a small financial and eco-
                  nomic information agency, RBC is now a public
                  company that has attained undisputed leader-
                  ship on the business news market, while its RBC
                  brand is one of the most popular ones among
                  the Russian media. The majority of Russian busi-
                  nessmen and entrepreneurs have chosen RBC’s
                  primary resource (www.rbc.ru) as their home
                  pages, while major financial organizations have
                  their TVs tuned invariably into RBC TV through-
                  out the day. In 2005, RBC’s total business audi-
                  ence on the Internet and television reached
                  10m people.

                  RBC has consolidated over 15 business, themat-
                  ic and entertainment Internet resources, with
                  their total audience numbering some 1.35m
                  unique visitors a day, and over 10m users a
                  month. The high quality information products
                  and their popularity among target audiences
                  are appealing to both Russian and foreign ad-
                  vertisers, with their total number surging above
                  2,300 in 2005. According to the Company’s es-
                  timates, RBC controls some 47% of the total In-
                  ternet banner advertising market.




              IT BUSINESS                            MEDIA BUSINESS
                           About the
                           Company
         RBC TV


  INFORMATION AGENCY


   INTERNET RESOURSES



    PRINTED EDITIONS



   BUSINESS ANALYTICS



  MARKETING RESEARCH



 INFORMATION TERMINALS



 BUSINESS CONFERENCES



      TAILOR-MADE
       SOFTWARE


      ERP-SYSTEMS



      CRM-SYSTEMS


  DOCFLOW/WORKFLOW
       SYSTEMS


   CORPORATE PORTALS



   INTERNET SOLUTIONS



     IT CONSULTING



   SYSTEM INTEGRATION



MULTIMEDIA PRESENTATIONS
12




     RBC TV is Russia’s first and only business televi-
     sion channel. RBC TV reaches out to one third
     of the country’s population. According to in-
     dependent surveys, its monthly audience has
     reached virtually 5m viewers, and its average
     viewing time matches that of national chan-
     nels. The channel cooperates actively with
     CNBC, CNN and Bloomberg, the world leaders
     in news broadcasting and distribution of eco-
     nomic information on western markets.

     Since 2000, the Company has been providing
     information technology (IT) services and de-
     veloping software. It has succeeded and won
     recognition among its clients and partners in
     this fast developing segment of the Russian
     market. The expertise and experience gained
     enable RBC to successfully develop and imple-
     ment comprehensive IT solutions at more than
     300 companies and governmental organiza-
     tions. Based on iOne rating, RBC has joined the
     top ten of Russia’s largest software developers
     in 2005.

         High-quality corporate governance has
            remained among RBC’s priorities. Ad-
              herence to shareholders’ interests,
               openness and transparency are
                 the key components of the Com-
                  pany’s corporate governance
                   policy that underlies all its de-
                   cisions. In 2005, RBC was once
                    again praised by independent
                    experts for its corporate gover-
                    nance.

                      RBC has become the first com-
                      pany in contemporary Russia
                      to make an IPO (initial public
                      offering) on the home market.
                      RBC’s shares are trading on
                       the RTS and MICEX, Russia’s
                       major trading floors; as well
                       as through a Level 1 ADR pro-
                      gram.




                 .
                                                                                                                 13




Company Structure

RBC’s company structure enables it to efficiently coordinate the activity of over 1,500 employees and allo-
cate duties among its departments.



                                           Board of Directors

        German Kaplun                   Alexander Morgulchik                        Dmitry Belik

          Sergey Lukin                       Yuri Rovensky                         Artyom Inutin

      Hans-Joerg Rudloff                  Michael Hammond                           Neil Osborn



          Dmitry Belik                      German Kaplun                     Alexander Morgulchik
  Vice-Chairman and Chief Financial   Chairman of the Board of Directors   Vice-Chairman for Business Strategy
              Officer                             and CEO                          and Development




                                               General Director
                                                Yuri Rovensky


                                                                                    MEDIA BUSINESS & RBC TV
    IT BUSINESS DIRECTOR                    MARKETING COMMUNICATIONS                       DIRECTOR
       Alexey Kuzovkin                                                                   Artyom Inutin


   SOFTWARE DEPARTMENT                          CONFERENCE DEPARTMENT                 INFORMATION AGENCY


    CORPORATE SOLUTIONS                             MEDIA RELATIONS                          RBC TV
        DEPARTMENT                                   DEPARTMENT


     INTERNET PROJECTS                                                              EDITORIAL STAFF OF RBC’S
        DEPARTMENT                                HR DEPARTMENT                       INTERNET RESOURCES


     SYSTEM INTEGRATION                         ADMINISTRATION &                     RESEARCH & ANALYTICS
        DEPARTMENT                           MAINTENANCE DEPARTMENT


  IT CONSULTING DEPARTMENT                                                          EDITORIAL STAFF OF RBC’S
                                                                                       PRINTED EDITIONS


 MULTIMEDIA PRESENTATIONS                                                             FINANCIAL PLANNING &
       DEPARTMENT                         LEGAL DEPARTMENT
                                                                                            CONTROL


                                          INVESTOR RELATIONS                        ACCOUNTING DEPARTMENT
14




     rbC holding Structure

     OAO RBC Information Systems is the
     ultimate holding company and owns
                                                NAME OF ENTITY
     outright (100%) all subsidiaries that it
     incorporates. RBC holding structure
                                                 ZAO RosBusinessConsulting
     has been aligned so as to optimize
     business processes and workflow be-
     tween the Company’s units.
                                                 ZAO RBC SOFT
     RBC also participates in joint ventures,
     where it is necessary to consider the
     needs of its customers and the re-
     quirements of specific transactions.        OOO RBC Center
     It is the Company’s policy to hold a
     minimum of 50% ownership in a joint
     venture that bears the RBC name. In
                                                 ZAO RBC Holding
     addition, the Company insists on hav-
     ing the ability to influence material
     business decisions in all joint ventures
     that it enters into.                        ZAO RBC TV



                                                 OOO RBC Publishing



                                                 «RBC Investments (Cyprus) Limited»



                                                 ZAO RBC Engineering



                                                 OOO Mass Media Group



                                                 OOO SMTP Press
                                                                                                                                 15




LIST OF KEY COMPANIES WITH THE PARTICIPATION OF OAO RBC INFORMATION SYSTEMS
(as of december 31, 2005): 1


ACTIVITIES


     an information agency



     specializes in the development, implementation and sales of software for medium-sized and large businesses, as well as
     the development of Internet solutions


     a system integrator implementing individual large projects and serving contracts awarded as a result of tenders for large
     clients including governmental agencies



     represents RBC in joint ventures or share capital of other companies



     a business television channel



     provides advertising services



     provides services to RBC’s foreign clients



     the founder of the electronic newspaper RBC Daily covering financial, economic and political events



     set up to conduct media activities in Ukraine



     performs the functions of a publishing house, editorial office and distributor for the RBC magazine


1
    The Company’s share in the autorized capital of the entities listed below is 100%
Chapter IV

             Macroeconomic Situation in
             russia in 2005

             Russia has continued to enjoy rapid economic
             growth in 2005. In the first quarter, business activ-
             ity in the country was described as rather low, but
             the situation improved in the second and third
             quarters. As a result, the growth of Russia’s 2005
             GDP (6.4%) was only slightly below the 2004 level
             (7.2%).

             The main reason for impressive economic growth
             in 2005 was a boom in Russian consumer spend-
             ing. In addition, business activity in the country
             was fueled by a hike in investment expenditures,
             which have remained high since 2003 (around
             10% a year). Foreign demand for Russian products
             saw further growth and served as an additional
             positive impetus for the national economy. As in
             previous years, however, an increase in imports
             prompted by the strengthening of the ruble and
             an increase in consumer spending had a negative
             impact on general economic growth.

             During 2005, the real incomes of the population
             were increasing, and reached 13.9% by the end
             of 2005, compared to 5.8% in December 2004.
             In addition, the purchasing conditions improved:
             consumer lending became more affordable after
             banks dropped their interest rates for individuals.
             The rate of employment rose on the back of high
             business activity. In late 2005, the unemployment
             rate was 5.7%, compared with 6.1% in Decem-
             ber 2004. A reduction in the rate of inflation was
             good news for the consumer market in the sec-
             ond half of 2005.

             Corporate investments rose some 10% nation-
             wide over the reported period, which was due to
             lower country risks, lower interest rates on loans
             and increased corporate incomes.

             Foreign demand grew substantially against a
             background of price hikes on Russia’s main export
             products in 2005. Consequently, the country’s
             trade balance in dollar equivalent increased by
             about 1/3 in the third quarter of 2005, compared
             to the same period in 2004. In real terms, export
             growth was slowing down in the third quarter
                                      business
                                      Overview
and ended up at 5.5%, compared
to 12% in the third quarter of
2004.

Meanwhile,       import    growth
remains impressive. Despite a
slight overall slowdown, imports
closed the year at 22%. Import
growth was the number one
reason for slower economic and
GDP growth in 2005. The increased
demand for imports is linked to a
significant ruble strengthening
against world currencies noticed
over the past several years.

Lower demand for domestically
manufactured goods fueled
competition for consumers
in Russia. As a result, inflation
pressure began to subside, which
slowed down the rate of inflation
to 11% in the second half of
2005. Lower levels of inflation
are in many ways connected to
significantly lower levels of price
increases on domestic products.
This seems to be due to stricter
pricing policies implemented by
the government with regards to
natural monopolies. In addition
to this, Russian companies
underwent a technological
upgrade which resulted in cost
savings.

A favorable situation on global
markets boosted corporate
incomes. In 2005, medium and
large-sized companies reported
a 37% upsurge in nominal profits.
The main driving factor for this
lays in higher global oil and gas
prices. In addition, higher energy
prices and lower investment
risks in the country pushed the
Russian stock market to a record
high in 2005 (the RTS Index more
than doubled) and had a positive
impact on the development of
Russia’s media and IT markets.
18




        rTS InDeX DynAMICS In 2005                                       eight with the highest ad market growth, Ze-
                                                                         nithOptimedia says their global market share
     1.100
     1.050
                                                                         will increase to 26% by the year 2008.
     1.000
       950
                                                                         Macroeconomic stability linked to high oil
       900
       850                                                               prices and relatively low inflation served as
       800
                                                                         the main driving force for the Russian adver-
       750
       700                                                               tising market. As a result, the year 2005 saw
       650
                                                                         numerous deals and new projects, especially
       600
       550                                                               in the sphere of print media.
             jan   feb mar apr may jun   jul   aug aug sep oct nov dec

                                                                         The Russian media market growth has seri-
        Source: www.rts.ru
                                                                         ously outpaced the GDP growth. As a result,
        russian Media Market in 2005                                     advertising expenditures accounted for 0.79%
        According to ZenithOptimedia, the global ad-                     of the GDP of Russia in 2005, compared to the
        vertising market totaled $406bn in 2005, with                    previous 0.66%.
        an average growth rate of 5% per annum.
                                                                         Advertising spending per capita has been
        Russia’s stake on this market is still insignifi-
        cant, however, the growth demonstrated by                        growing as well, but still remained low. Com-
        the national media market is one of the most                     pared to the USA, where this figure is some
        impressive in the world, which makes it more                     $867 and the European Union with $236 on
        and more noticeable and attractive to world                      average, in Russia it is only $35. However, tak-
        players. PricewaterhouseCoopers predicts                         ing into consideration the ongoing boom on
        that Russia will remain the leader in terms of                   the Russian media market, the hike in adver-
        advertising market growth until at least 2009                    tising expenditures per capita is supposed to
        with 13.3% CAGR for 2005-2009. ZenithOpti-                       speed up over the next several years.
        media sees the compound annual growth
        rate of the Russian media market going even                      TV advertising remains the largest segment of
        higher than that, i.e. around 24% between                        the Russian media market. According to AKAR,
        2005 and 2008.                                                   it ended the year 2005 with $2.3bn, i.e. 46.5%
                                                                         of the whole media market. Its growth stayed
        In 2005, the Russian media market enjoyed                        at the level of 2004 (37%), but outpaced the
        further tremendous growth. According to                          market trend in general. The Association re-
        the Russian Association of Communication                         ported that the share of TV advertising would
        Agencies (AKAR), overall Russian advertising                     further grow and get close to 57% of the to-
        market increased 30% per annum on average                        tal media market by 2010. Supply exceeding
        over the past three years. In 2005, media ad-                    demand and as a result a price hike were the
        vertising went up 28%, compared to 33% in                        major driving forces behind the segment’s
        2004, with the total market volume reaching                      growth in 2005. The demand for TV advertis-
        $5.01bn (indirect advertising not counted).                      ing is increasing as the average cost of reach-
                                                                         ing the TV audience remains underestimated
        Compared to 2004, when Russia scored 14th                        compared to other mass media, and there
        in terms of ad spending, by the year 2008 it                     is also a greater demand for TV advertising
        is set to be among the top ten, ZenithOpti-                      among producers (especially manufactur-
        media forecasts. Brazil, Russia, India, Indonesia                ers of consumer products), as well as due to
        and China all together account for only 6-10%                    the appearance of new products and servic-
        of the global media advertising market. How-                     es along with a new type of advertisers. Ac-
        ever, since these countries are among the top                    cording to analysts from Video International
                                                                                                                                     19




ruSSIAn MeDIA MArKeT In 2005
 	




                                                                       	
                                 	 0. 4 %
                          1.2%
                                      46.5%
                     5.   8%	
               	
              %
            .0
        6
  %	
10.3




                                                                                 TV                                 Radio
                                                                                 Outdoor advertising                Newspapers
                                                                                 Magazines                          Internet
                                                                                 Other printed                      Other
     	
   6%




                                                                                 editions
 1.    1




                                                              	




                                 18.2%
                                      	    	

Source: Russian Association of Communication Agencies (AKAR), February 2006




  advertising agency, the portion of advertising                              According to AKAR analysts, magazines will be
  expenditure in the end prices of products is al-                            increasing their stake in the print advertising
  most two times lower in Russia than in Brazil and                           market over the next several years, which will be
  Mexico and is predicted to grow. They also con-                             the result of a reduction in the number of adver-
  sider the redistribution of federal budget money                            tising editions. The number of newspapers will
  between regions the most important trend of                                 remain almost unchanged. Therefore, by the
  2005, as a result of which the regional TV adver-                           year 2010 magazines will account for over 50%
  tising market added 50-60%.                                                 of advertising in the print media. Advertising
                                                                              editions will have 25%, and newspapers – 22%.
  Advertising in print media remains the second                               AKAR expects the print media to control some
  largest segment of the Russian advertising mar-                             20% of the media market of Russia by 2010 and
  ket. AKAR estimated that $1.4bn (28% of the to-                             remain the second largest after television.
  tal media market) was spent on this kind of ad-
                                                                              The outdoor advertising market reached $910m in
  vertising in 2005. However, its growth slowed
                                                                              2005. With 28% growth it left print media (16%)
  down from 28% in 2004 to 16% in 2005 as peo-
                                                                              and radio (20% and $300m) behind in 2005.
  ple began spending more time watching TV
                                                                              However, both outdoor advertising and radio
  and surfing the Internet. Advertising in maga-
                                                                              advertising are likely to lose their position in the
  zines enjoyed the most dynamic growth at 23%,                               future falling from 18% and 6% in 2005 to 13.5%
  and raised $580m. Newspapers received $290m                                 and 4.5% respectively by 2010.
  in advertising revenue (up 16%), and advertising
  editions - $520m (up 8%). Experts link the dy-                              Today, the Internet advertising market is the fast-
  namic development of the magazine segment                                   est growing segment both in Russia and glob-
  to the appearance of foreign publishing brands                              ally. In 2004, Internet advertising expenditures
  on the Russian market, which has made the mar-                              added 67%, and 71% in 2005, which is twice the
  ket even more competitive.                                                  total market growth. According to AKAR, in 2005
20




     GrOWTh OF The reGIOnAl MeDIA
     MArKeTS In 2005
       3.1%     EUROPE
       3.6%       NORTH AMERICA
       5.5%           ASIAN-PACIFIC REGION
       17.1%                                   AFRICA/MIDDLE ASIA/OTHER COUNTRIES
       19.3%                                           LATIN AMERICA
       26.8%                                                                        RUSSIA
       5.2%           WORLD AVERAGE
       0%             6%              12%              18%             24%            30%
     Source: ZenithOptimedia, December 2005.

     FOreCASTeD GrOWTh OF The
     reGIOnAl MeDIA MArKeTS In 2008
        4.1%         EUROPE
        4.3%          LATIN AMERICA
        4.8%            NORTH AMERICA
        8.1%                       ASIAN-PACIFIC REGION
        11.6%                                      AFRICA/MIDDLE ASIA/OTHER COUNTRIES
        21.7%                                                                RUSSIA
        4.7%                  WORLD AVERAGE
       0%             5%              10%              15%             20%            25%
     Source: ZenithOptimedia, December 2005.




     advertisers spent $60m on Internet advertising                             main driving force of the market’s develop-
     (not counting context-oriented advertising),                               ment. Additionally, traditional advertising tools
     compared to $35m in 2004. However, many ex-                                have become more and more expensive which
     perts think that real figures may be much high-                            has made advertisers switch to the Internet. In
     er than that. President of IMHO VI advertising                             the future, the Internet is set to create serious
     agency, Arsen Revazov, estimated the total In-                             competition for the print media. So, being well
     ternet advertising market to be equal to $100m                             aware of that, publishers have been launch-
     in 2005. Some $65-70m came from banner ad-                                 ing entire electronic versions of their editions,
     vertising, and $30-35m – context-oriented ad-                              especially newspapers. Experts say, these and
     vertising. Market analysts say, the Internet ad-                           many other factors will boost Internet advertis-
     vertising market may add 90%1 in 2006.                                     ing and have it reach 5% of the total advertis-
                                                                                ing market by the year 2010.
     According to the online newspaper RBC Daily,
     in Russia only 6% of the population have ac-                               According to AKAR, BTL (Below-The-Line) ex-
     cess to the Internet, compared to 22% on av-                               penditures, which account for a significant
     erage in Europe and 55% in the USA. At the                                 stake in the advertising budgets of consumer
     same time, Internet advertising accounts for                               companies, reached $1.35bn in 2005, against
     5% of the total advertising market in the USA,                             $1.06bn in 2004.
     while in Europe it is around 2% on average2.
     In Russia, this figure was only a little over 1% in                        A new advertising law was signed by Russian
     2005. However, the Internet audience is seeing                             President Vladimir Putin in early 2006 that is to
     tremendous growth. The number of Internet                                  come into force on July 1, 2006. In particular, it
     users in Russia jumped by 18%, 37% - in Saint                              decrees that TV advertising shall not account
     Petersburg and over 40% - in Moscow. Accord-                               for more than 20% of every single broadcast-
     ing to J’son & Partners consulting company,                                ing hour (12 minutes) or more than 15% of the
     the average weekly Russian Internet audience                               total daily broadcasting, instead of the present
     topped 10 million people in 2005. Of course,                               25% and 20% respectively. Starting from 2008,
     the increasing number of Internet users is the                             it will be dropped to 15% for both per hour and
     1
       Click on advertising // Business Week Russia.- 13.02.2006
     2
       The Russian advertising market in 2005// www.mediapilot.ru
                                                                                                                             21




AD eXpenDITureS AS perCenTAGe OF GDp
In 2005

   0.79%                       RUSSIA
   0.79%                       EU
   1.33%                                      USA
   1.40%                                       POLAND
   1.44%                                        CZECH REPUBLIC
   2.28%                                                            HUNGARY
   0%             0.50%         1.00%          1.50%        2.00%      2.50%
Source: ZenithOptimedia, December 2005; www.cia.gov

per CApITA AD SpenDInG
In 2005, $

   867                                                                    USA
   35    RUSSIA
   236                    EU
   93        POLAND
   159              CZECH PEPUBLIC
   247                     HUNGARY
  0               200               400         600          800       1000
Source: ZenithOptimedia, December 2005; www.cia.gov




per day broadcasting. According to experts, this                     sales to home PC users and government institu-
law will boost TV advertising quotes by 40-45% in                    tions. But as PCs drop in price, the profit rise here
2008 compared to 2007. All this will make compa-                     will be mostly attributed to lap-top sales.
nies whose activities are subject to the new leg-
islation consider partial redistribution of their ad                 IT services accounted for 1/5 of all IT expen-
budgets and have them switch from national TV                        ditures in Russia in 2005. This market seg-
channels to niche television, the Internet and the                   ment is set to outpace the rest of the
print media sector.                                                  market in terms of growth in 2006. Though
                                                                     it is mainly represented by implementation
russian IT Market in 2005                                            services, management costs are predicted to
                                                                     grow more than sixfold within the next five
According to IDC, the Russian IT market reached
                                                                     years.
$12bn in 2005. This accounts to some 2% of the
global IT market. With 24-26% growth Russia’s                        Off-the-shelf software represented the small-
cutting-edge technologies outpaced the world’s                       est segment of the Russian IT market, i.e.
average by many times.                                               13% in 2005. According to IDC, it
                                                                     will stay close to 20% at least
Analysts explain these dynamics by a growing                         until the year 2009, owing
demand for Russian software products, the de-                        to the interest of small
velopment of consumer lending and expansion                          and medium-sized
of retail chains that sell computers and electron-                   businesses in these
ics.                                                                 products.

70% of IT sales in Russia are generated by its larg-
est segment, i.e. hardware, which added 32% in
2005. Personal computers (PCs) remain the num-
ber one item in this segment. They are set to re-
main the market’s number one driving force in
the foreseeable future, owing to the increased
22




     ruSSIAn IT MArKeT In 2001-2006F,                           IT MArKeT GrOWTh OuTlOOK In
     (bn $)                                                     VArIOuS reGIOnS


                                                                400%

     16                                         15.2            300%
     14                                  12.0
     12                                                         250%
     10                           9.0
      8                     7.1                                 200%
                  5.9
      6
          4.4
      4                                                         150%
      2
      0                                                         100%

          2001   2002      2003   2004   2005   2006F                  2003     2004       2005          2006F 2007F 2008F

                 Total                                                      Russia                            Brazil
                 Software sales                                             China                             North America
                 IT Equipment                                               Central and Eastern Europe        Western Europe
                 IT Consullting                                             Latin America


     Source: IDC, CNews                                         Source: IDC, CNews




     IDC pointed out that the Russian IT market is              A number one trend in 2005 was that for the
     growing faster than the rest of the world now              first time western investors began to look
     with the outlook for the next three years pre-             seriously into Russian stocks. They invested
     dicted to be fairly stable.                                some $700m in the Russian IT industry in
                                                                2005, which is 75% more than in 2004, J’Son &
     The Russian Ministry of Information Technolo-              Partners (J&P) reported. Analysts say that for-
     gy and Communications predicts the national                eign investments in the Russian IT market will
     IT market will hit $40bn by the year 2010, with            reach $1bn in 2006.
     2/3 of domestically manufactured products
     “consumed” internally, and 1/3 - exported. In              The market is cheered by positive expectations
     2005, software exports added 50% and prac-                 connected with the establishment of a com-
     tically reached $1bn ($994m), the Ministry re-             plete legislative base that in fact treats the IT in-
     ported.                                                    dustry as a foreground segment for the Russian
                                                                economic development and guarantees its sta-
     Russia’s IT market growth surpasses greatly                ble growth. For example, the adoption of a law
     the GDP growth and that of the real incomes                On Digital Signature will boost the IT market’s
     of the population, which explains the growing              capacity and, consequently, raise the cost of IT
     share of the IT market in the country’s GDP.               companies. Passing laws on personal data and
                                                                amendments to the Tax Code stipulating special
     ruSSIAn IT MArKeT In 2001-2006F,
                                                                tax procedures for IT companies will serve as a
     (bn $)
                                                                                     strong impetus for the na-
                                                                                     tional IT industry.
                                  2001 2002     2003    2004   2005 2006F
      Total                       4.4    5.9     7.1    9.0    12.0        15.2              The government is set to
                                                                                             remain a major IT con-
      IT Consulting               0.8    1.2     1.4    1.8     2.5        3.3               sumer in Russia. Major fed-
      IT Equipment                3.1    3.8     4.7    6.0     7.9        9.8               eral institutions such as the
                                                                                             Customs Committee, the
      Software Sales              0.5    0.9     1.0    1.2     1.6        2.1               Tax Ministry, the Economic
     Source: IDC, CNews
                                                                                                             23




Development and Trade Ministry will continue          tions, it adds at least 30-35% (or even at least 50%
upgrading their IT systems on the back of macro-      according to an optimistic approach) per annum.
economic stability and high oil prices. IT expen-     The retail IT market represented by off-the-shelf
ditures by regional administrations will be much      software products for PCs, medium and small
lower, with the only exception being the govern-      businesses, is enjoying a healthy growth as well.
ment of Moscow, which will be further imple-          Russia’s offshore programming market amounted
menting various IT projects.                          to $994m in 2005.

Educational institutions and retail companies         An important driver behind the Russian software
will demonstrate the highest increase in IT and       market development will be the establishment of
telecommunications spending, since they only          so called specialized technological parks. An act
started implementing cutting-edge information         related to this issue was approved in early 2005,
technologies not long ago. IT expenditures of the     and the first IT parks are to appear in St. Peters-
banking and consumer services segments will           burg, the Moscow Region and Novosibirsk.
grow significantly, with the former finding itself




among the top three in terms of investments in IT     rbC’s Media business
in Russia by the year 2008. According to IDC, the     News, Quotes, Analytics
total IT spending in Russia will top $17bn by 2008.
                                                      RBC was established in 1993 as an information
Software accounts for a much smaller part of the      agency specializing in financial and econom-
Russian IT market, compared to western coun-          ic news. The Company continues to develop
tries. However, this means that as the Russian        this business branch further and now issues
market develops, software and consulting spend-       around 1,300 different news and analytical
ing shall enjoy a higher growth than the rest of      materials per day covering all segments of the
the IT market in general. Among the top Russian       economy, as well as the activities of top Rus-
software developers are RBC, Lanit, Diasoft, Parus    sian and foreign corporations, financial orga-
Corporation, and 1C.                                  nizations and governmental institutions.

The software market shows the highest growth          RBC offers a wide range of news lines, topic
rate in Russia now. According to J&P’s estima-        surveys, articles, press digests, news alerts,
24




     economic ratings, marketing and analytical           e-mail service (www.pochta.ru) and others.
     research to its users.                               As of December 2005, the monthly audience
                                                          of RBC’s sites reached 10m people (5.7m in
     RBC’s information is broadcast via world lead-       2004), and the daily audience was 1.35m us-
     ing news agencies, such as Bloomberg, COM-           ers (0.65m in 2004). RBC outpaces its clos-
     TEX, Lexis-Nexis, Screaming Media, Reuters           est competitors in the Internet (web sites of
     (Factiva), Tenfore and Internet Securities.          news agencies and business newspapers) in
                                                          terms of the audience size by 15 to 20 times.
     RBC has a whole range of analytical software
     products and databases necessary for an in-          The growing number of popular RBC web
     depth capital market analysis, which are avail-      sites along with the impressive social and
     able for subscribers to RBC’s paid resources         demographic quality of the audience en-
     and users of its financial and analytical termi-     abled the Company to raise banner adver-
     nal, QuoteTotal.                                     tising rates by 35% on average in 2005 and
                                                          announce another price hike for static ban-
     RBC is activity growing marketing research           ners on all RBC’s resources by 18% (25% on
     sales. The Company collects, systematizes and        www.autonews.ru) beginning April 2006
     sells market research of the leading Russian         and by at least another 18% beginning Sep-
     companies, as well as its own surveys. As of         tember 2006.
     the end of 2005, RBC’s database included over
     2,000 surveys of various industries. Among           The Company employs over 100 ad sales
     the Company’s 150 partners are the leading           specialists and as a result its direct sales ac-
     Russian marketing agencies and Russian de-           count for around 80% of the total advertis-
     partments of Western consulting companies.           ing revenue, and the rest (some 20%) comes
     RBC’s online store, Market Research, is a num-       from advertising agencies. According to RBC,
     ber one distributor of market intelligence in        its share on the Internet banner advertising
     Russia and the CIS.                                  market was about 47% (context-oriented ad-
                                                          vertising not counted) in 2005. In the same
     In 2005, the Company introduced new Internet         year, the Company’s client base included
     projects, such as RBC Real Estate, added more sec-   about 2,300 advertising clients, who promote
     tions to already existing websites, and changed      their products and services on RBC’s Internet
     the design and structure of some of them in order    resources and the business channel RBC TV.
     to increase the number of advertising spots.         Considering the popularity of advertising
                                                          spots on RBC’s websites and the Company’s
     RBC remains one of the most attractive and ef-       strong sales team, RBC began buying adver-
     ficient advertising platforms on the Russian         tising spots from other Internet resources
     Internet. The Company owns Russia’s number           acting as an advertising agent for them.
     one financial and economic portal, www.rbc.ru,
     along with other business-oriented Inter-            In March 2005, RBC entered a rather large
     net platforms, specialized online resources and      and dynamically growing Ukrainian media
     general websites. These include the RBC Daily        market by launching the information agency
     analytical business newspaper (www.rbcdaily.ru);     RBC Ukraine (www.rbc.ua). RBC Ukraine was
     the QuoteTotal financial and analytical portal       established to provide the local audience
     (www.quote.ru); Internet portals dedicated           with up-to-date news on economic and
     to hi-tech news (www.cnews.ru), the automo-          political life in Ukraine, the most important
     tive market (www.autonews.ru), tourism and           events in the CIS and other countries, along
     travel (www.turist.ru), an educational online        with analytical commentaries, information
     resource for students (www.5ballov.ru), a dai-       from financial markets, quotes and currency
     ly electronic newspaper (www.utro.ru), free          exchange rates.
                                                                                25




                           RBC TV

                           RBC TV business television channel went live
                           in September 2003 and ever since has been
                           the only source of business news on Russian
                           television. Round-the-clock RBC covers eco-
                           nomic, financial and relevant political events in
                           Russia and abroad, features analytical reviews,
                           forecasts and expert commentaries, interviews
                           with top businessmen and politicians, business
                           press reviews, as well as special programs look-
                           ing into current issues for Russian business.

                           In 2005, RBC TV ensured a good coverage in
                           almost all major cities of Russia. At present, the
                           television channel is available to most of its
                           core audience: managers, state officials, busi-


rbC TV’S VIeWerShIp (Mln peOple)

                                                             2005     2004
 Monthly audience                                             4.8      n/a
  Weekly audience                                             4.1      3.1
 Daily audience on weekdays                                   2.1      1.7
 Daily audience on weekends                                   1.6      1.3
Source: COMCON Media, November 2005



                           nessmen and persons responsible for making
                           key business decisions. The technical penetra-
                           tion of the channel reached 41.6m Russians. In
                           addition, the television channel distributes its
                           signal to the CIS states including Ukraine, Ka-
                           zakhstan and Belarus, and the Baltic countries.
                           According to RBC’s estimates, RBC TV’s total
                           coverage outside Russia was close to 15m peo-
                           ple by the end of 2005.

                           According to the independent research com-
                           pany COMCON Media, RBC TV boosted its
                           weekly audience by 1/3 in Russia over a one-
                           year period, i.e. from 3.1m viewers in October
                           2004 to 4.1m viewers as of November 2005.
                           The channel’s monthly audience reached 4.8m
                           viewers, the daily audience on weekdays add-
                           ed 24% from 1.7m in 2004 to 2.1m in 2005. In
                           terms of average viewing time RBC TV was
                           ranked No. 2 after the largest national TV chan-
                           nel, Channel One.
2




      rbC TV’S AuDIenCe                                                                   Over 90% of informa-
                                                                                          tion featured on RBC TV
                                    Average age                              38           is dedicated to events
      Owners and heads of companies, top managers, private                                in Russia and produced
                                                                           21.5%          in-house. In addition,
      entrepreneurs
      Viewers with a scientific degree, higher or incomplete                              the television channel
                                                                           63.9%          broadcasts information
      higher education
                                                                                          on the course of trade on
      Viewers discussing the issues raised by RBC TV with their
                                                                           41.7%          global markets, as well as
      partners and colleagues
                                                                                          business and economic
      Viewers having conducted transactions with real estate
                                                                           28.5%          news produced by the
      and securities over the past year
                                                                                          CNBC and CNN televi-
      Viewers happy to pay more for a good                                                sion channels, which are
                                                                           65.4%
      quality products                                                                    the partners of RBC TV. In
      Viewers having one or more cars                                      52.6%          addition, RBC TV broad-
     Source: COMCON Media, November 2005




     AVerAGe TV VIeWInG TIMe (nuMber OF                            casts its programs devoted to the Russian busi-
     MInuTeS per WeeK)                                             ness and economy on CNN, and since February
                                                                   2005 - on CNBC Europe. Other partners of RBC
     • CHANNEL ONE . . . . . . . . . . . . . . . . . . 388         TV include Bloomberg, APTN and Reuters.

     • RBC TV . . . . . . . . . . . . . . . . . . . . . . . 282    RBC TV has modern studios with cutting-edge
     • ROSSIYA (RUSSIA) . . . . . . . . . . . . . . . . 281        equipment and high-grade technical capabili-
                                                                   ties. It widely employs continuously updated
     • CTC . . . . . . . . . . . . . . . . . . . . . . . . . 220
                                                                   graphic and textual video-materials (crawlers,
     • NTV . . . . . . . . . . . . . . . . . . . . . . . . 219     multi-image screens) that serve to illustrate and
       Source: COMCON Media, November 2005
                                                                                                            2




promptly reflect recent market changes. The          integration of Russia’s scientific, economic and
television signal is beamed via NTV Plus satel-      cultural achievements into the global develop-
lite channel, cable networks (Comcor TV, MTU         ment process. THE BEST BRAND/EFFIE is an an-
Inform, St. Petersburg Cable Television JSC and      nual award for the most successful projects in
Cosmos TV), interactive television Stream TV,        brand building on the Russian market.
regional partners, and via the Internet. In Oc-
tober 2005, RBC TV introduced a new program          Print Media
schedule. Changes were made to the channel’s         In 2005, RBC made a strategic decision to en-
design, graphics and concept of a number of          ter the print media market, in view of its rapid
programs. In addition, new programs were             growth buoyed by strong demand for advertis-
added. The new program schedule is intend-           ing in magazines targeting high-income audi-
ed to boost RBC TV’s audience and cover new          ences. RBC sees print media products as anoth-
specialized economic issues. The key advertis-       er channel of distribution of RBC’s content.
ers of RBC TV are financial organizations, in-
cluding banks and insurance companies; real          Since January 2005, RBC has published the
estate agencies, construction firms, business        monthly magazine CNews, focusing on high-
service providers, telecommunications and hi-        tech markets. The magazine, which has a circula-
tech companies, as well as companies trading         tion of 25,000 copies, reports the most interest-
on exchanges.                                        ing and significant events of the hi-tech industry
                                                     covered by the website www.cnews.ru, and
Marketing Communications                             is distributed by subscription. The magazine’s
Growing recognition of the RBC brand among           business model is based on advertising rev-
the business world, combined with its vast ex-       enues.
perience in organizing effective advertising
campaigns and cooperating with other media,          In March 2006, RBC launched the monthly busi-
is helping RBC develop its marketing commu-          ness magazine RBC, with a print run of 75,000
nications. RBC hosts international business con-     copies. The magazine targets business owners
ferences and acts as an advertising agency for       and top managers first of all, but it is also of in-
some of its big advertising clients. RBC’s busi-     terest to a broader audience watching the lat-
nesses conferences are traditionally held twice      est trends and events of the Russian and inter-
a year, and their mission is to draw the attention   national business. The magazine is available in
of specialists and experts in different areas to     stores and by subscription across the whole of
economic and social problems in order to de-         the Russian Federation. Its main source of profit
velop reasonable solutions jointly.                  is advertising and subscription revenues.

The Company also hosts such prestigious na-          rbC’s IT business
tional awards as The Person of the Year, The         RBC’s software and IT services portfolio in-
Company of the Year, and THE BEST BRAND/EF-          cludes both custom-made and off-the-shelf
FIE. The Company of the Year award is aimed          software solutions (corporate portals, content
at drawing the attention of the Russian society      management, leasing management, mass me-
and international business community to com-         dia monitoring and analyzing systems etc.)
panies operating on the Russian market, mak-         for various business spheres, system integra-
ing domestic businesses more attractive to in-       tion services as part of the IT consulting busi-
vestors and contributing to Russia’s integration     ness, and offshore programming.
into the global economy. The Person of the Year
helps to unite the public, business community        RBC has gained extensive experience in
and the authorities, calling attention to persons    implementing and tailoring ERP and CRM,
or companies exercising significant influence        docflow & workflow management and e-
on the country’s development; it also promotes       commerce systems and other business ap-
28




     IT reVenue breAKDOWn In 2005
       	




                                                          	
                                 45 %

                    	
                  5%
              1




                                                                    Russian companies
     	




                                                                    Government institutions
                                                                    Foreign clients
          	




                                                    	




                             40%
                                 	   	
     Source: Company data




     plications, to clients’ needs. Thus, RBC’s large         partnership with them. For example, RBC has
     projects completed in 2005 include an in-                started the development of portal solutions
     formation and analysis system based on an                based on Sun One Portal platform by Sun
     integrated database for the Federal State Statis-        Microsystems for state agencies and large
     tics Service of Russia (Rosstat); an information         companies.
     system, “Russia’s state statistics Internet por-
     tal,” for the Economic Development and Trade             RBC is continuously refining the quality of its
     Ministry of Russia; implementation of the                products and solutions. The IT division counts
     industry’s largest billing system for Golden             over 240 highly qualified employees. RBC’s
     Telecom, and a docflow management system                 quality management system is ISO 9001:2000
     for the legal company Pepeliaev, Goltsblat and           certified till 2008. The quality of RBC’s solutions
     Partners.                                                is commended annually by ratings and awards.
                                                              For instance, The Platinum Diploma for “The
     RBC is an undisputed leader in website                   Best Logistics Information Solution 2005” was
     development. The Company boasts Russia’s                 granted to RBC for the automation system
     most powerful technological capability, which            named Motor Transport developed for the
     it uses to develop high quality reliable software,       Federal Customs Service of Russia at the 6th
     and that enables it to create Internet solutions         Moscow International Logistics Forum (MFL-
     of any level of complexity. RBC specialists              2005). Another example is the win in “The best
     have completed over 900 Internet projects for            Internet project 2005 among metallurgical and
     various organizations and companies operating            metal trading companies in Russia and the CIS,”
     in a wealth of business spheres.                         for design of the website developed for the Ural
                                                              Mining and Metallurgical Company (UGMK).
     RBC provides system integration services and
     offers solutions from the world’s major vendors          In 2005, RBC started some large projects,
     of IT products and services, including Microsoft,        including the development of the National
     Intel, IBM, Oracle, Siebel, Documentum, Sun,             Electronic Library for two Russian major
     Radware, and i2, and is seeking to enhance its           libraries; equipping the Federal Education
                                                                                                         29




Agency’s distance-learning centers throughout         The year 2005 was the fourth year of RBC’s
the CIS with all required computer and                nomination among 500 hi-tech companies in
communications systems; implementation of             Europe, the Middle East and Africa, (Deloitte
one of the largest distance learning systems          Technology Fast 500 list) displaying the fastest
for the Federal State Statistics Service; creating    rate of development, where The Company
a national e-library of research and research-        was ranked 139th. Additionally, the Company
and-development activities for the Russian            was rated 10th among Russia’s top software
President’s administration. Additionally, RBC         developers, and 3rd for its business efficiency
proceeded to portals development for the              by iOne.
Federal Institution of Industrial Property of
Russia and the Federal Tax Service.                   In late 2005, RBC reached an agreement
                                                      for the acquisition of Helios Computer and
In 2005, the Company shifted its focus to clients     ASKO-TBS Consulting. Helios Computer’s core
mainly from Russia and the CIS as it sees no          activities are centered on production and
imperative need to concentrate on offshore            system integration of IT equipment, and ASKO-
programming services for customers from               TBS Consulting specializes in IT consulting.
countries outside the CIS. This move has been         The acquisitions expanded RBC’s staff by
prompted by high marketing costs, expensive           200 employees. The aggregate client base of
and time-consuming procedures for getting on          the two newly acquired companies boasts
the vendor list of potential clients, with no order   over 150 government institutions and private
volumes guaranteed, against the backdrop of           companies. RBC plans to consolidate the assets
heavy competition from Indian companies.              in 2006. The acquisitions will contribute to
Taking advantage of its fair brand recognition,       the Company’s revenue and grow its market
vast technological experience and expertise in        share. The Company intends to increase the
its clients’ specific nature, RBC has boosted the     economic efficiency of the acquired firms
number of contracts with Russian corporate,           (as their profitability is lower than that of
governmental and private customers.                   the core RBC’s IT business) by actively using
                                                      cross-selling opportunities and cost synergies
As of 2005, RBC’s clients numbered over               with its current IT operations, whereas the
300 large and medium-sized companies                  media part of RBC’s business will offer an
representing various economy sectors as well          excellent promotional platform. Additionally, a
as government institutions. 45% of IT revenue         broader scope of IT products and services and
comes from Russian corporations, while                significantly increased revenue will enable RBC
government institutions and foreign clients           to successfully bid for larger IT contracts.
account for 40% and 15% respectively.
Chapter V

            Directors’ report


            Strategic Achievements
            In 2005, RBC reinforced its top position on
            the business mass media market (according
            to Company data, RBC controlled around
            47% of the Russian banner advertising mar-
            ket), and thus ensured high demand for its
            services from advertisers targeting at a highly
            educated and affluent audience. Aiming at
            long-term growth on the market, in the pe-
            riod under review RBC consolidated small yet
            attractive non-business Internet resources,
            as the Internet is becoming more affordable
            to the public at large. RBC TV expanded its
            coverage to 41m people in Russia and 15m
            people abroad, maintaining a strong viewer
            loyalty (weekly average viewing time) com-
            parable to that of nationwide channels. The
            number of RBC’s clients advertising through
            its Internet resources and TV channel reached
            some 2,300 companies.

            In the information technology (IT) field, RBC
            has shifted its focus onto clients from Rus-
            sia and the CIS. Using its strong brand name,
            broad technological expertise and excellent
            track record, RBC enhanced its contracts with
            domestic corporate, government and private
            customers, with their total number exceed-
            ing 300 by the end of 2005. Furthermore,
            RBC reached agreements to make two stra-
            tegic acquisitions in IT consulting and system
            integration, which will consolidate the Com-
            pany’s position in the respective areas with a
            high growth potential. In 2005, RBC was for
            the fourth time ranked in the Deloitte Tech-
            nology Fast 500 list among the fastest devel-
            oping EMEA hi-tech companies.

            In 2005, EBITDA and the net profit were grow-
            ing faster than the revenue. RBC’s consolidat-
            ed net profit more than doubled, rising from
            $10.0m (13% of revenue) in 2004 to $20.8m
            (19% of revenue) in 2005, largely due to RBC
            TV channel reaching a break-even point in
            2005. Consolidated EBITDA advanced from
            $19.1m (25% of revenue) in 2004 to $29.6m
                                    performance
                                    Overview for 2005
(27% of revenue) for the year
under review.

The Company’s media busi-
ness (73% of the total 2005 rev-
enue) remained RBC’s priority,
with strong synergies appar-
ent between Internet and TV
products. RBC continued to
develop its information tech-
nology business (27% of the
total revenue), and the recent
IT acquisitions are intended to
boost the share of the IT rev-
enue in 2006.

Media Services. RBC’s total reve-
nue from media services grew
54% from $51.9m in 2004 to
$80.1m in 2005, developing
ahead of the market, which ad-
vanced 28% last year, accord-
ing to the Association of Com-
munication Agencies of Russia.
The growth is attributable to
higher revenue from RBC TV
and impressive results from key
advertising and information
products. Besides, the overall
growth on the media market
amid Russia’s economic upturn
thanks to steady high oil prices
and the expanding, although
small, middle class also contrib-
uted to RBC’s performance.

The revenue from Internet ad-
vertising rose 69% from $21.1m
in 2004 to $35.7m in 2005, with
prices and an increase in the
number of available advertis-
ing spots being the primary
drivers. RBC raised its advertis-
ing rates in April and in Sep-
tember 2005, the effective in-
crease being nearly 36%. Also,
the Company developed new
web properties (for example,
RBC Real Estate), added new
32




                                                                                     1
     Key COnSOlIDATeD FIGureS FOr 2004-2005

                                           December 31, 2005                             December 31, 2004               Y-o-Y
                 Всего
                                       mln $            % of revenue                 mln $         % of revenue        Change, %

         Revenue                        109.4                                        76.9                                 42%

         EBITDA                         29.6                   27%                   19.1                  25%            55%

         Net profit                     20.8                   19%                   10.0                  13%           108%

     1
         Based on 2005 consolidated financial statements in accordance with IFRS.



     buSIneSS reVenue breAKDOWn FOr 2004-20052

                                                                                                                  % of total revenue
                         $ ‘000 000                           2005           2004           Change Y-o-Y, %
                                                                                                                         2005
                            MEDIA                              80.1           51.9                 54%                   73%
      Internet advertising                                     35.7           21.1                 69%                   33%
      RBC TV                                                   24.3           16.5                 47%                  22%
      Marketing communications                                 16.0           10.4                 53%                   15%
      Information services                                      4.1            3.9                  5%                   4%
                               IT                              29.3           25.0                 17%                   27%
      General programming                                       17.0          14.0                 21%                   15%
      Offshore programming                                      4.1            6.3                -35%                   4%
      System integration                                        8.2            4.7                 73%                   7%
                       Total revenue                           109.4          76.9                 42%                  100%

     2
         Based on 2005 consolidated financial statements in accordance with IFRS and management accounts


     sections to existing resources and refurbished                                   RBC TV for the first time generated a posi-
     several web sites (Cnews.ru, Autonews.ru) to                                     tive net financial result since the launch in
     increase the number of advertising spots.                                        September 2003. As most of the investment
     The capacity utilization of advertising spac-                                    in the TV channel had already been made,
     es available on RBC’s business sites, which                                      operating expenses were growing at a much
     brought about 88% of the online advertising                                      slower pace than the revenue, bringing the
     revenue, reached nearly 100%. It urged the                                       Company’s total profit margin up from 13% in
     Company to seek new, mainly non-business                                         2004 to 19% in 2005.
     Internet platforms.
                                                                                      The revenue from marketing communications
     RBC TV’s revenue reached $24.3m, up 47%                                          increased by 53% from $10.4m to $16.0m in
     from the previous year ($16.5m) driven by a                                      2005. The significant growth was mainly driv-
     growing volume of advertising and product                                        en by the agent’s fees that RBC received while
     placement, as advertisers increasingly appre-                                    placing advertising for some of its clients on
     ciated the premium target audience offered                                       others’ media resources. RBC is also receiving
     by the business television channel. In 2005,                                     sponsorship revenue from organizing inter-
                                                                                                        33




national conferences and such national busi-        as RBC decided put a greater focus on offer-
ness awards as ‘The Best Brand’, ‘Company of        ing IT services to domestic clients as opposed
the Year’ and ‘Person of the Year’.                 to providing outsourcing services to foreign
                                                    customers. The reasons for this are high mar-
Information services accounted for $4.1m of         keting costs, expensive and time-consuming
the revenue, up 5% from $3.9m in 2004, which        procedures for getting on the vendor list of
can largely be accounted for by the sales of        potential clients without a guaranteed order
market research reports and the QuoteTotal          volume, amid strong competition.
information terminal and its versions. The
company also offers access to news lines and        Development Strategy
analysis, data feeds with quotes from stock         RBC’s goal for the coming years is to become
and commodity exchanges and over-the-               a diversified media company represented in
counter markets, databases, economic rat-           all segments of the Russian media market.
ings, rankings and a wide range of surveys.         Nevertheless, the Company regards the seg-




IT Services. RBC’s total revenue from IT services   ments in which it is already represented, that
advanced by 17% going up from $25.0m in             is, television, the Internet and the print me-
2004 to $29.3m in 2005 based on the Com-            dia segment, as top priority. It plans to further
pany’s proven track record, in-depth industry       expand its market share in these segments
knowledge and skilled personnel, as well as         through launching new startup projects and
bolstered by the growing need within the            making value-accretive acquisitions.
Russian corporate and government sector for
advanced IT products and information sys-           On the Internet front, RBC will seek to main-
tems.                                               tain its position of a leading business infor-
                                                    mation provider in Russia and attain a similar
General programming generated $17.0m in an-         standing in other CIS countries. At present,
nual revenue, a 21% increase from $14.0m in         RBC’s successful business-oriented online re-
2004. The system integration branch reported        sources allow the Company to charge premi-
a 73% growth from $4.7m in 2004 to $8.2m            um advertising rates for access to quality au-
in the period under review. This performance        diences consisting of well-educated people
was partly offset by lower sales in offshore        with higher than average incomes. Despite
programming, which contributed $4.1m in             the overall growth of people’s incomes in
2005 compared to $6.3m in the previous year,        Russia fuelled by a positive macroeconomic
34




     situation, the concentration of wealth in the                                             On the television side, RBC intends to build up
     country will still be rather strong for at least                                          its market share primarily through enhancing
     several years to come. Hence, the mass media                                              RBC TV’s technical coverage and viewership
     targeting affluent demographic will be favor-                                             in Russia and in certain spots abroad, which
     ably positioned to keep their advertising rates                                           will then enable the Company to increase
     at a high level in the mid-term perspective.                                              advertising time sell-out ratio and raise ad-
                                                                                               vertising rates. Presently, the TV segment can
     In addition, RBC has started expanding into                                               be characterized by an acute lack of advertis-
     the segment of non-business related In-                                                   ing spots due to the average price per con-
     ternet resources. Statistics testify that with                                            tact with audience on TV being understated
                                                                                               against other media, as well as due to the
     cheapening Internet access services and
                                                                                               growing demand on the markets of the ad-
     new technologies getting more widespread,
                                                                                               vertised goods and services, and emergence
     the biggest growth in Internet users is cur-
                                                                                               of new goods and services and new types of
     rently among ordinary urban dwellers. Con-
                                                                                               advertisers. The newly passed law “On Adver-
     sequently, within the upcoming 3 to 5 years,
                                                                                               tising”, which reduces an advertising quota
     users of non-business websites will become                                                on television, will also have huge impact on
     an appreciable audience for advertisers, in-                                              the market. Experts forecast that the law will
     cluding producers of fast moving consumer                                                 result in TV advertising prices being 40-50%
     goods. In this context, the Company plans to                                              higher in 2008 than in 2007. The changes are
     keep purchasing attractive general Internet                                               expected to force companies subject to the
     resources, and implement its own projects in                                              new law to reallocate part of their corporate
     the sphere.                                                                               advertising budgets from national TV chan-


     rbC’S MeDIA buSIneSS STrATeGy




                               REVENUE                                                REVENUE


                  BUSINESS       MARKETS        INTERNATIONAL              IT                  AUTO             REAL ESTATE      TRAVEL             LUXURY, ETC   ...
                   NEWS



                  RBC.RU
     INTERNET   RBCDAILY.RU      QUOTE.RU        RBCDAILY.RU           CNEWS.RU           AUTONEWS.RU          REALTY.RBC.RU    TOURIST.RU



                                                                                                                                                                        GROWTH
                               SECTION IN RBC   SECTION IN RBC          CNEWS             SECTION IN RBC       SECTION IN RBC
      PRINT     RBC MAGAZINE
                                 MAGAZINE         MAGAZINE             MAGAZINE             MAGAZINE             MAGAZINE




                  NOVOSTI                        ZARUBEZHNY                               AVTONOVOSTI
       TV        KOMPANIY          RYNKI           BIZNES               C-NEWS             AVTOEXPERT          NEDVIZHIMOST




                                                                                   RESOURSES                                                 growing niche
                               core business                                                                                                 business
                                                               Information & analysis, researches, journalists, editors
                                                                                                         35




nels to niche television, Internet and print        the core business and surrendering the main-
media.                                              tenance of non-core business processes to
                                                    specialized companies. RBC’s IT business is to
The Company finds the print media segment           be expanded through both organic growth
an attractive sphere for its further develop-       and acquisitions.
ment, and is considering both the opportu-
nity of launching new projects and acquiring        In late 2005, RBC reached a principal agree-
specialized magazines targeted at a high-in-        ment on purchasing a controlling stake in a
come audience. Despite the global down-             system integrator that also owns IT manufac-
ward trend in press circulations, the business      turing facilities. This acquisition will enable
print and glossy magazine audiences are to          RBC not only to offer a wider range of IT ser-
shrink least of all. Forecasts by the Associa-      vices to its clients, but also to build IT systems
tion of Communications Agencies of Russia           on its own equipment, which consequently
(ACAR) also testify to the attractiveness of        will increase the share of maintenance activi-
this segment. For instance, budgets allocat-        ties in RBC’s further relations with customers.
ed for advertising in newspapers, magazines         In addition, RBC has reached an agreement
and other print media, will have exceeded           to acquire a stake in an IT consultant to fos-
Internet advertising threefold by 2010 even         ter the development of its corresponding IT
though the latter is growing faster than ad-        branch.
vertising in print.
                                                    RBC is set to further pursue the strategy ad-
RBC regards the press as another distribution       opted in 2000 aimed at rendering services of
channel for its content. In future, materials       the highest possible quality. This is currently a
from RBC’s printed products are to be used          strong competitive advantage on the Russian
in their Internet versions, which will allow to     market, and will remain so for the coming 3
increase the Company’s profitability.               to 5 years, amid the rapid growth of IT spend-
                                                    ing in the country and a low quality of ser-
The Company’s growth strategy for its IT busi-      vices provided by average IT players in chase
ness implies the development of a full range        of quick profits.
of IT services for Russian companies and gov-
ernment agencies. The Company focuses on            As its major tasks in the IT field for 2006, RBC
development and implementation of enter-            views successful integration of its newly ac-
prise management systems, analytical prod-          quired assets, increase in the total sales vol-
ucts and Internet solutions. The manage-            ume and profitability of the consolidated IT
ment does not expect significant growth in          business through raising the share of techni-
the area of offshore programming, which will        cal maintenance services and the number of
nevertheless remain one of RBC’s activities so      off-the-shelf solutions.
as to let the Company keep up with the latest
trends on other markets and be able to inten-
sify this division if needed.

RBC plans to develop industry-specific prod-
ucts and automated process control systems
in the near future, and to promote its services
related to the support of clients’ IT infrastruc-
ture, including the full outsourcing of cus-
tomers’ IT function to RBC. This is due to the
continued penetration of IT services in orga-
nizations, customers’ concentrating efforts on
Chapter VI

                                  RBC’s personnel is the Company’s recipe for
                                  success. The Company is operating in econom-
                                  ic sectors where the team’s professionalism is
                                  a key factor, and hence RBC’s human resources
                                  policy is aimed at building an upscale, reliable
                                  and cohesive team capable of bringing the
                                  Company to a leading position amid intense
                                  competition on the media and IT markets.

                                  In 2005, RBC focused its efforts as far as the HR
                                  and social policy is concerned on enhancing
                                  professional skills and qualification of the em-
                                  ployees; offering incentives to them; pursuing
                                  a more socially-oriented policy and corporate
                                  culture; building a personnel reserve to be pro-
                                  moted to managerial positions; improving ad-
                                  aptation programs for new employees and fur-
                                  ther developing social programs.

                                  In 2005, RBC’s average staff number rose by 16%
                                  to 1621 people, with the media subdivision ac-
                                  counting for the highest growth of 60% due
                                  to the acquisition of various Internet resources
                                  and development of new print media projects
                                  and Internet products to be launched in 2006.
                                  RBC TV’s number of staff remained virtually
                                  the same due to the TV channel’s established
                                  structure. The number of IT personnel grew by
                                  9% on account of the growing number of con-
                                  tracts and increased scope of work.

                                 AVerAGe STAFF nuMber In 2005

                                                                 Number
                            Department
                                                                 of staff
             Media (exclusive of TV)                               520
             TV                                                    650
             IT                                                    242
             Administrative
                                                                   209
             and auxiliary personnel
             TOTAL                                                 1621
                                  Sources: Company data



                                  Salaries, personnel Development and
                                  Corporate Culture
                                  To motivate its personnel, RBC offers its em-
                                  ployees competitive market-level salaries stem-
                                  ming from employees’ efficiency and produc-
                                  tivity. In 2005, the monthly average salary at
                                      personnel
                                      and Social policy
RBC grew by an average of 11%
from the year 2004 taking taxes
and bonuses into account. This
rise was primarily backed by the
general upward trend on the la-
bor market, and hiring of better-
paid specialists.

Along with remuneration for
employees’ labor, including sal-
aries, social benefits and com-
pensation; moral incentives and
promotions are also a vital part
of RBC’s HR policy.

RBC’s human resources policy
is not only aimed at taking on
qualified specialists, but also
at maintaining proficiency at a
high level, providing conditions
for each of them to achieve their
full labor and creative potential,
instilling corporate solidarity and
commitment to the Company’s
interests in them. The main tools
to attain the objectives are em-
ployee training, including vari-
ous seminars and workshops,
and preparing a managerial re-
serve.

Training programs are aimed at
both increasing the expertise of
employees, and helping them
to gain necessary skills in client
relations, project management,
and general management. To
raise the competence of its spe-
cialists and top managers, the
Company engages leading edu-
cational institutions.

In 2005, RBC’s top management
held a regular annual meet-
ing to report to employees on
the year’s achievements and
plans for 2006. At the meeting,
the Company’s specialists who
performed best in 2005 were
awarded.
38




     The Company arranges corporate holidays and        subdivisions engaging the new specialists in-
     cultural and sporting events that are also of      troduce them to the Company’s mission, struc-
     great importance in encouraging employees’         ture and activities, main operating principles,
     corporate solidarity and assisting their moral     technologies and workflow management, du-
     and physical development. Every year, RBC          ties specific to their new positions and their role
     stages corporate events celebrating the Com-       in the Company’s development. Also, newcom-
     pany’s anniversary and the New Year. RBC’s         ers gain access to the corporate intranet portal,
     management takes part in special off-premise       My.RBC, which gives an insight into RBC’s op-
     team-building trainings.                           eration and contains internal documents and
                                                        regulations. In 2005, tutoring practices were
     RBC’s employees may participate in volleyball,     further refined. Tutors work out lists of tasks for
     basketball, table tennis and other sports com-     the probation period for newly engaged spe-
     petitions regularly arranged by RBC. The Com-      cialists. At the end of probation periods, the HR
     pany also holds various contests for its employ-   department assesses the work done based on
     ees and their children, announced through the      reports submitted by tutors and the newcom-
     My.RBC corporate intranet resource.                ers.

     Adaptation programs                                Social policy
     for newcomers                                      RBC lays a special emphasis on social responsi-
     In 2005, RBC developed new adaptation              bility, as the Company can only count on busi-
     schemes for newly hired employees aimed at         ness stability and success if it is socially respon-
     reducing the personnel fluctuations during         sible.
     probation periods and improving the efficien-
     cy of newcomers. Once they are taken on, em-       RBC offers a number of privileges and compen-
     ployees get acquainted with the Company at         sations to its employees, for instance discounts
     special presentation meetings, when heads of       on insurance policies, health services, fitness
                                                                                                       39




club cards, credits (including mortgage loans),      Aviation and Space Show, etc. The Company’s
and other services. The list of special offers for   IT division stages special free training work-
the Company’s employees is regularly updated         shops for its clients.
on the My.RBC resource, granting them dis-
counts in various areas.                             The RBC TV channel is regularly airing social
                                                     advertisements. In 2005, RBC was honored by
RBC has joined the Russian Association of Elec-      a letter of thanks from the World Wildlife Fund
tronic Communications (RAEC Non-for-Profit           for placing WWF social advertising. Under its
Partnership) aiming to facilitate the establish-     partnership agreements with CNN and CNBC,
ment and development of a single information         RBC TV produces weekly broadcasts about Rus-
society and publicize information and commu-         sia and its economy, business and people for
nication technologies, including the electronic      these channels, with a view to consolidate the
mass media in Russia. RBC is also one of the         positive image of Russia in Western countries.
leading media companies in Russia of those
that have united to check the rapid spread of
AIDS and HIV in Russia.

During 2005, RosBusinessConsulting Russian In-
formation Agency provided media support to
a variety of organizations and social and eco-
nomic, cultural and sporting events, to include
the Bolshoi State Academic Theatre, State Tre-
tyakov Gallery, Russian Public Relations Asso-
ciation, Kremlin Cup, Russian Fashion Week in
Moscow, World Karate Championship, Moscow
International Advertising Festival, Sergei Andri-
yaka’s School of Watercolor, MAKS International
Chapter VII

              RBC’s authorized capital is comprised of com-
              mon registered non-documentary shares
              granting equal rights to their holders.

              Pursuant to the Federal Law ‘On Joint-Stock
              Companies’ and RBC’s Articles of Association,
              shareholders or owners of RBC’s common stock
              are eligible to participate in general sharehold-
              ers’ meetings with the right to vote on all is-
              sues within the meetings’ competence, receive
              dividends, and get a part of the Company’s as-
              sets (a liquidation quota) in case it is liquidated.
              The Company’s internal documents impose no
              restrictions on voting and participation in the
              authorized capital by minority or foreign share-
              holders.

              In December 2005, RBC made an additional is-
              sue of common shares numbering 4,260,000
              securities with a par value of RUR0.001 each.
              Report on the Additional Securities Issue was
              registered with the Federal Financial Markets
              Service of Russia in March 2006. As a result of
              this placement RBC’s share capital increased to
              119,260,000 common non-documentary shares
              with a par value of RUR0.001 ruble each, as of
              December 31, 2005.




               rbC’S ShAre CApITAl STruCTure
               (as of December 31, 2005)

                                       1.85%
                                                                     	




                                               46.9
                                                   2%
                                  %	
                               01
                         1   0.
                 %	
              4 1. 2 2
                    	




                                         	
                                                    For Shareholders
                                                    and Investors
In March 2005, RBC in collabora-
tion with the Bank of New York
(the Depository) issued Level-
1 ADRs (in a proportion of one
ADR to four common shares) in
order to give further impetus
to liquidity growth and to ex-
pand the list of investors. The
ADRs trade on the over-the-
counter (OTC) market under the
ticker symbol RINFY (CUSIP No.:
75523Q102). Foreign investors
have been showing consider-
able interest in the instrument,
and the number of ADRs out-
standing has been growing rap-
idly since the program launch
and reached 2,984,482 receipts
(10.01% of RBC’s authorized capi-
tal) as of December 31, 2005.

As of December 31, 2005, RBC’s
register shows the following
nominee shareholders owning
over 5% in the Company: ZAO
Depositary Clearing Company
(17.6%), J.P.Morgan Bank Inter-




     Legal entities
     RBC management*
     ADRs
     Individuals


* the management’s stake is given in accor-
dance with records of the register of OAO RBC
Information Systems. In fact, the management
holds a controlling stake in the Company, con-
sidering that they have lent part of their shares
for a fixed period of time under share lending
agreements. Taking into account all the shares
lent, the management holds 60.83% of RBC’s
share capital.
42



     national (12.6%), ZAO ING Bank
     (Eurasia) (16.0%), Non-commercial
     Partnership National Depositary
     Center (7.3%) and ZAO Citibank
     (7.1%).

     RBC’s shares have been listed on
     A2 Quotation Lists and trade un-
     der the RBCI symbol on Russia’s
     two largest stock exchanges, the
     Moscow Interbank Currency Ex-
     change (MICEX) and the Russian
     Trading System (RTS Stock Ex-
     change). Owing to high liquidity
     and stable trade volumes, in late
     2003 RBC’s shares were included
     in the RTS Index (RTSI), and in
     March 2006 - in the MICEX Index.

     Investors’ interest in the Compa-
     ny’s shares was rising throughout
     the year 2005, due to a consider-
     able expansion of the Company’s
     business and improved corporate
     governance. In 2005, RBC was
     ranked 14th among the most liq-
     uid issuers in Russia in terms of
     trading volume on Russian stock
     exchanges by the daily Kommer-
     sant-Dengi. In June 2005, RBC
     joined the top one hundred ma-
     jor Eastern European companies,
     based on its market capitaliza-
     tion, in The Financial Times rating.
     In 2005, RBC’s shares surged by
     147%, while the RTS and MICEX
     indices increased 85%.
                                                                                                                                           43




  rbC’S MAJOr ShArehOlDerS (over 5%)
  (as of December 31, 2005)

  14.42%                                                                  Dmitry Belik*
  13.12%                                                           Alexander Morgulchik*
  12.91%                                   German Kaplun*
  10.01%                               THE BANK OF NEW YORK**

 0%               5%              10%              15%               20%               30%


  * - the management’s stake is given in accordance with records of the register of OAO RBC Information Systems.
  In fact, the management holds a controlling stake in the Company, considering that they have lent part of their
  shares for a fixed period of time under share lending agreements. Taking into account all the shares lent, the
  management holds 60.83% of RBC’s share capital.

  **- nominee shareholder




 DynAMICS OF rbC’S ShAre prICe                                                       rbC’s Dividend policy
 AGAInST The rTS AnD MICeX InDICeS                                                   RBC is operating in the fast growing sectors
 In 2005, %                                                                          and is aiming at the leadership in these busi-
                                                                                     nesses, which requires considerable capital in-
220%
200%
                                                                                     vestments. To meet the objective, RBC’s Board
180%                                                                                 of Directors has recommended the annual
160%
140%
                                                                                     general shareholders’ meeting reinvest the re-
120%                                                                                 tained earnings for the year 2005 to achieve
100%
 80%
                                                                                     further growth. This decision follows RBC’s divi-
 60%                                                                                 dend policy adopted in 2003, which implies
 40%
 20%
                                                                                     that most of the Company’s net profit should
  0%                                                                                 be allocated for its development within com-
       jan   feb mar apr may jun     jul   aug sep oct nov dec                       ing years. RBC plans to pursue this policy as
                                                                                     long as it is developing fast and its financial in-
                 RBC             MICEX           RTS                                 dicators are likewise rising.


 •     RBC’s share price was calculated as the average of the bid and
       offer prices on the RTS Stock Exchange.

 •     the value of Indices was calculated based on closing prices.
Chapter VIII

               RBC’s commitment to high-standard corporate
               governance principles ensures the transpar-
               ency and efficiency of its business and, conse-
               quently, the investment attractiveness of the
               Company.

               In its activity, the Company is guided by glob-
               ally accepted information disclosure principles,
               complies with all provisions of the Russian leg-
               islation in the field of corporate governance
               and follows the main requirements of the Cor-
               porate Governance Code adopted by the Fed-
               eral Securities Market Commission.

               RBC has adopted its own Corporate Gover-
               nance Code, which is set to:

               • ensure efficient protection of rights and
                 interests of all shareholders,
               • observe the transparency principle in the
                 decision-making process,
               • establish professional and ethical liability
                 of the members of the Board of Directors
                 along with other executives and sharehold-
                 ers,
               • improve information transparency of the
                 Company.
               The Corporate Governance Code of RBC con-
               sists of a number of fundamental documents
               that outline the Company’s policies, includ-
               ing the Provisions on the General Meeting of
               Shareholders, the Regulations of the Board of
               Directors, the Provisions on the Audit and Com-
               pliance Committee, the Provisions on Informa-
               tion Policy, the Provisions on Dividends, and the
               Provisions on Material Corporate Transactions.

               Based on the 2005 business results, RBC was as-
               signed a Class A corporate governance rating
               by the Expert RA Russian rating agency.

               In 2005, RBC joined Russia’s top 10 companies
               in the Standard & Poor’s Transparency and Dis-
               closure Survey conducted among 67 Russian
               companies, and was ranked number 8.
                                    Corporate
                                    Governance
Shareholders’ rights
According to the Company’s in-
ternal documents, minority and
foreign shareholders of RBC are
entitled to have a stake in the
Company’s authorized capital
and vote, while members of the
Board of Directors are elected by
the General Shareholders’ Meet-
ing through a cumulative vote.
Shareholders possessing at least
2% of the Company’s shares are
entitled to introduce issues to
the agenda of the General Share-
holders’ Meeting, nominate can-
didates to the Board of Directors
and the Audit and Compliance
Committee, as well as propose
the Company’s auditor.

The Provisions on Material Cor-
porate Transactions allow RBC’s
shareholders to influence mate-
rial transactions of the Company
by establishing a transparent
procedure for disclosing the in-
formation on the consequences
that such transactions can have
on the Company.

On June 22, 2005, the General
Shareholders’ Meeting resolved
to approve an independent
company with an unblemished
reputation on the global audit
market as RBC’s external audi-
tor (Minutes No. 16 dated July 6,
2005). Also, this company does
not provide any additional non-
audit services to RBC, which
guarantees the total objectivity
of the auditor’s report.

The share registration services
for the Company are provided
by ZAO Irkol, an independent
specialized registrar.
4




     Information Disclosure                              affiliates; and have access to annual accounting
     Approved by the Board of Directors, the Provi-      statements with the auditor’s reports, annual
     sions on Information Policy regulates the Com-      reports of the Company, presentations and oth-
     pany’s obligations in terms of the volume of in-    er internal documents, including the Articles of
     formation disclosure, as well as the promptness     Association of RBC, provisions on the executive
     of the provision of information and its accessi-    governing and control bodies, as well as provi-
     bility to all interested persons.                   sions on the corporate governance.

     The main principles of RBC’s information policy     All information and documents accessible to
     are as follows:                                     public are displayed on RBC’s corporate web-
                                                         site www.rbcinfosystems.com, published in the




     • regularity and promptness in the provision        mass media in accordance with the terms stip-
       of information,                                   ulated in the current law, provided as copies
     • accessibility of information to the majority of   upon request of interested parties, and avail-
       shareholders and other interested parties,        able for review in RBC’s office.

     • accuracy and completeness of information          All material information about RBC’s opera-
       to be disclosed,                                  tions, including internal regulations of the
     • neutrality of information,                        Company, is displayed on the corporate web-
                                                         site. Prior general shareholders’ meetings be-
     • maintenance of a reasonable balance be-
                                                         ing held, all necessary information is posted in
       tween the Company’s openness and protec-
                                                         a website section devoted to shareholders and
       tion of the Company’s interests,
                                                         in the Corporate Events section. RBC’s material
     • compliance with the requirements of con-          fact notices, quarterly reports and RBC’s related
       fidentiality with regard to information that      party lists are all structured to make it easy for
       constitutes a business or commercial secret       shareholders to keep track of particular events
       and control of the use of insider information.    and business dynamics over a substantial pe-
     All interested parties may receive on a regular     riod of time.
     basis information about material facts relating
     to RBC’s securities and the shareholders hold-      On a regular basis, RBC issues press releases
     ing at least 5 percent in the Company; deals        for investors, arranges meetings and confer-
     made by RBC and changes in its business; RBC’s      ence calls with analysts and shareholders, and
                                                                                                              4




participates in investment conferences, forums           RBC’s Board of Directors is responsible for gen-
and road-shows.                                          eral strategic supervision of the Company’s ac-
                                                         tivities aimed at obtaining the highest possible
Since the launch of the Level 1 American De-             profits and augmenting the Company’s assets,
positary Receipt program in 2005, RBC provides           protecting the rights and legitimate interests of
all its public information to the US Securities          its shareholders, continuous monitoring of the
and Exchange Commission.                                 executive bodies, and providing for complete-
                                                         ness, reliability and impartiality of RBC’s public
executive Governing                                      information. In 2005, the number of seats in
and Control bodies                                       the Board of Directors was reduced from 12 to
RBC’s corporate governance structure has been            9 with a view to enhance the body’s efficien-
streamlined so as to efficiently distribute pow-         cy. On June 22, 2005, the General Meeting of
ers among the Company’s governing bodies                 Shareholders resolved to withdraw the powers
and sustain an adequate internal audit system.           of the following Board of Directors’ members:
                                                         Yuri Mostovoy, Givi Topchishvili, Ekaterina Lebe-
The supreme governing body of the Company                deva, Leonid Khazan and Oleg Dyatlov. In their
is the General Meeting of Shareholders.                  place, Yury Rovensky and Artyom Inutin joined
                                                         the Board of Directors.
RBC’s Audit and Compliance Committee moni-
tors the financial and economic activities of the        Special committees comprising independent
Company, its bodies and officials, subdivisions          and non-executive directors have been estab-
and services, branch offices, representations,           lished within the Board or Directors to refine its
subsidiaries and other separate business units.          work. RBC’s Board of Directors held 9 meetings
Members of the Audit and Compliance Com-                 throughout 2005.
mittee are determined by RBC’s General Meet-
ing of Shareholders.                                     A vertically integrated control and internal audit
                                                         system enables the Company to monitor the
                                                         efficiency of the current operations of its sub-




rbC’S COrpOrATe GOVernAnCe STruCTure



                     GENERAL MEETING OF SHAREHOLDERS OF OAO RBC INFORMATION SYSTEMS




    AUDIT AND COMPLIANCE                                                         AUDIT AND COMPLIANCE
                                             BOARD OF DIRECTORS
         COMMITTEE                                                                    COMMITTEE




                           EXECUTIVE BOARD




       INTERNAL AUDIT                                                                COMPENSATIONS
                                             GENERAL DIRECTOR
         DEPARTMENT                                                                    COMMITTEE
48




     sidiaries, and to forecast risks related to RBC’s     risk structure and implement risk management
     activities at an early stage. Risks may result from   strategies affecting financial accounting, as the
     both external and internal factors such as com-       Committee is responsible for supervising the
     petition, economic environment, changes in            reliability of RBC’s accounting by monitoring
     the legislation, shortcomings of the Company’s        the internal control system, the process of pre-
     business model as well as drawbacks of the in-        paring RBC’s financial reports and compliance
     ternal audit system.                                  with relevant regulations. Programs developed
                                                           by the Audit and Compliance Committee are
     Key risk factors that rbC may                         actually implemented by the internal audit de-
     encounter include:                                    partment subordinated to the Committee and
     • macroeconomic risks (for instance, the risk         controlled by the Company’s General Director.
       of changes in the state’s economic policy,
       regulatory environment governing the                RBC’s General Director, who is the Company’s
       Company’s activities, inflation and devalua-        sole executive body, supervises RBC’s day-
       tion risks, the risk of slower development of       to-day operations, and acts as the head of its
       the IT industry and Russian Internet, and the       collegial executive body, the Executive Board.
       activity of large competitors etc.);                The scope of authorities of RBC’s executive
                                                           body embraces all the issues pertaining to the
     • technical risks (such as data corruption or         management of the Company’s operations, ex-
       destruction, or unauthorized access to data         cluding issues within the competence of RBC’s
       resulting from incorrect operation of hard-         General Meeting of Shareholders and Board of
       ware or software, or wrongful acts by staff         Directors.
       and/or third parties);
     • legal risks (for exapmle, violation of law, in-     RBC’s internal documents lay down the re-
       terference of third parties for the purpose of      sponsibility of the executive body to regularly
       declaring a share issue invalid).                   submit material information on the Company’s
                                                           day-to-day activities to the Board of Directors.
     Outlining a general strategy to reduce possible
                                                           This measure secures the promptness of deci-
     risks is within the competence of RBC’s Board of
                                                           sion-making by the Board of Directors should
     Directors. The Company’s top management is
                                                           any operational or financial risks emerge. As-
     in turn responsible for assessing risks the Com-
                                                           sessments of the internal audit system held
     pany is facing, and working out risk manage-
                                                           by the Board of Directors ensures constant
     ment procedure in line with the policy of the
                                                           streamlining of internal control procedures and
     Board of Directors. The function of the Audit
                                                           improvement of their efficiency.
     and Compliance Committee is to analyze the
                                                                                                                     49




The board of Directors and the executive board


                German Kaplun
                ChAIRmAn Of the BOARD Of DIReCtORS
                memBeR Of the COmpenSAtIOnS COmmIttee

                Mr. Kaplun has a wide experience in                    currently holds a stake in a real estate
                banking, programming, and consult-                     company. Education: Ph.D. in Economics
                ing. He previously held the position of                from the Plekhanov Russian Academy of
                Director of Banking Technology in                      Economics.
                a Moscow software development
                company. Before fully committing                       Interest held in the share capital of the
                to RBC in 1998, Mr. Kaplun held par-                   Company: 12.91 %.
                ticipatory interest in a small bank. He




                Alexander Morgulchik
                VICe-ChAIRmAn Of the BOARD Of DIReCtORS
                memBeR Of the AUDIt AnD COmplIAnCe COmmIttee

                Mr. Morgulchik has had previous work                   Economics from the Plekhanov Russian
                experience in accounting and finance,                  Academy of Economics.
                and has participated in a number of
                commercial ventures. These include                     Interest held in the share capital of the
                software/hardware trading company                      Company: 13.12%.
                and a real estate company, in which he
                is currently a partner. Education: Ph.D. in




                Dmitry Belik
                BOARD memBeR
                ChIef fInAnCIAl OffICeR

                Mr. Belik co-founded RosBusiness Con-                  financial officers in Russia by the Russian
                sulting in 1993 with Mr. Kaplun and Mr.                Managers Association. Education: Ph.D.
                Morgulchik, and he has been Chief Fi-                  in Economics from the Plekhanov Rus-
                nancial Officer with the Company since                 sian Academy of Economics.
                2000. Before concentrating solely on RBC
                in 1998, he was a partner in a number of               Interest held in the share capital of the
                ventures, and still holds a stake in a real            Company: 14.42%.
                estate company. In 2004, he was named
                among the top thirty most professional


                Artyom Inutin
                BOARD memBeR,
                memBeR Of the COmpenSAtIOnS COmmIttee, meDIA BUSIneSS DIReCtOR

                Mr. Inutin has been in charge of the                   ment. He has also worked in a trading
                Company’s media business since 1996.                   company as its Advertising Director.
                He held the position of the Deputy Gen-                Education: Moscow Technical University,
                eral Director of RIA RosBusinessConsult-               Russian Finance Academy, and Ph.D. in
                ing from 1994 to 1996. Prior to joining                Economics.
                the Company, Mr. Inutin was a develop-
                ment team leader at a Russian scientific               Interest held in the share capital of the
                institute where he was responsible for                 Company: 0%.
                managing database software develop-
50




     Hans-Joerg Rudloff
     InDepenDent BOARD memBeR
     memBeR Of the COmpenSAtIOnS COmmIttee

     Mr. Rudloff began his career at Kidder         management of Credit Suisse in Zurich.
     Peabody working for the firm’s offices in      In 1989, he became Chairman and CEO
     the U.S. and Europe, and became Chair-         of CSFB. Since 1998 Mr. Rudloff has been
     man of Kidder Peabody International in         Chairman of the Executive Committee
     1978. In 1980, he moved to Credit Su-          at Barclays Capital. He also serves on the
     isse First Boston, where he became the         Board of Novartis AG.
     driving force in the development of the
     firm’s international business. He was lat-     Interest held in the share capital of the
     er elected CSFB Vice Chairman, and sub-        Company: 0%.
     sequently was appointed to the general


     Michael Hammond
     InDepenDent BOARD memBeR
     memBeR Of the AUDIt AnD COmplIAnCe COmmIttee

     Mr. Hammond is a Partner of City Capi-         career at Credit Suisse First Boston in
     tal Corporation Limited and recently           1982 and has held various senior syndi-
     held the position of Managing Director         cate/capital market management posi-
     at ABN-AMRO Rothschild. Prior to this,         tions in New York, Tokyo and London.
     he held executive director positions at
     Flemings, UBS Warburg and Swiss Bank           Interest held in the share capital of the
     Corporation. Mr. Hammond began his             Company: 0%.



     Neil Osborn
     InDepenDent BOARD memBeR
     memBeR Of the AUDIt AnD COmplIAnCe COmmIttee

     Mr. Osborn started his media career            appointed an Executive Director in Feb-
     in 1972 as a reporter at the Daily Prog-       ruary 1988. Since 1990 he has been the
     ress, Charlottesville, Virginia. In 1975 he    publisher and managing director of Eu-
     became a shipping journalist for Lloyds        romoney. Mr. Osborn is also a Member
     List at the Liverpool Daily Post. In 1978      of the Board for Euromoney Institutional
     he joined Institutional Investor as senior     Investor PLC.
     editor. He joined Euromoney in 1983
     as US Editor and became Editor of Eu-          Interest held in the share capital of the
     romoney at the end of 1985. He was             Company: 0%.


     Sergey Lukin
     BOARD memBeR

     Since 1991, Mr. Lukin has held manage-         Interest held in the share capital of the
     ment positions at Russian system inte-         Company: 0.77%.
     gration firms in the oil and gas, and in
     the banking sectors. He began his career
     at Aeroflot in 1987. Education: a univer-
     sity degree in Economics.



     Yury Rovensky
     BOARD memBeR, GeneRAl DIReCtOR

     The biography is outlined below.               Interest held in the share capital of the
                                                    Company: 0%.
                                                                                                        51




General Director


                                Yury Rovensky



                        Prior to joining the        remuneration to Members of the board
                        Company in 2000, Mr.        of Directors
                        Rovensky worked for         RBC’s policy of remuneration and personal
                        the State Investment        compensation to members of the Board of Di-
                        Corporation of Russia       rectors and top managers falls within the com-
                        as a Counselor to the       petence of the Compensations Committee.
Chairman. Other relevant work experience
includes positions at the Russian Union of In-      In 2002, the Committee approved an option
dustrialists and Entrepreneurs and the World        scheme for Board of Directors’ members and
Bank’s mission in Moscow. He also has an ac-        top managers of RBC for a period from 2003 to
ademic background, having worked for the            2005 in an effort to enhance their motivation.
Plekhanov Russian Academy of Economics for
7 years and part of this time held the position     On June 22, 2005, RBC’s General Meeting of
of Vice Chancellor of the Academy. In 2004,         Shareholders approved an additional issue of
Mr. Rovensky was named among the most               common non-documentary shares number-
professional mangers in the rating of the Rus-      ing 4,260,000 with a par value of RUR0.001
sian Managers Association. Education: Doc-          each (Minutes No. 16 dated July 6, 2005). Pursu-
torate degree in Economics from the Moscow          ant to the decision of the General Meeting of
State University, with additional coursework in     Shareholders, RBC placed 4,260,000 common
Marketing and Financial Analysis at the Har-        non-documentary shares at the market price
vard Business School and Groningen Univer-          of 154.82 rubles per share by private offering in
sity (the Netherlands).                             December 2005. As the Report on the Securi-
                                                    ties Issue was registered in 2006, the option-
Remuneration paid to the General Director for the
                                                    program shares are planned to be distributed
previous fiscal year amounted to RUR 194,355.86.
                                                    in 2006 as well.


The executive board

Chairman of the executive board:
Yury Rovensky
GeneRAl DIReCtOR


Members of the executive board:
Artyom Inutin
meDIA BUSIneSS DIReCtOR


Alexey Kuzovkin
It BUSIneSS DIReCtOR


Ekaterina Lebedeva
DIReCtOR Of RBC ReklAmA ADVeRtISInG AGenCy
related-party Transactions                            5.      The provision of a loan of 240,000,000
                                                           (two hundred forty million) rubles by the
                                                           Company to ZAO RBC HOLDING, at an
In 2005, OAO RBC Information Systems made a
                                                           annual interest rate of 6% (six percent).
number of deals that shall be considered related-
party transactions under Russian legislation.              Beneficiary is the lender, OAO RBC
In all the details listed below, members of the            Information Systems. The deal was approved
Board of directors and the General Director of             by the general meeting of shareholders.
OAO RBC Information Systems act as related
                                                      6.      The provision of a loan of 154,000,000
parties.
                                                           (one hundred fifty four million) rubles by
1.       The provision of a loan of 160,000 (one           the Company to its subsidiary ZAO RBC
     hundred sixty thousand) rubles by the                 HOLDING, at an annual interest rate of
     Company to the Autonomous Non-Profit                  6% (six percent). Beneficiary is the lender,
     Organization Steering Committee of the
                                                           OAO RBC Information Systems. The deal
     Brand of the Year Award, at an annual
                                                           was approved by the general meeting of
     interest rate of 6% (six percent). Beneficiary
     is the lender, OAO RBC Information Systems.           shareholders.
     The deal was approved by the general             7.      The provision of a loan of 400,000 (four
     meeting of shareholders.
                                                           hundred thousand) rubles by the Company
2.       The provision of a loan of 697,000 (Six           to OOO RBC Pro, at an annual interest rate
     hundred ninety seven thousand) rubles by
                                                           of 6% (six percent). Beneficiary is the lender,
     the Company to OOO MERKOT, at an annual
                                                           OAO RBC Information Systems. The deal
     interest rate of 6% (six percent). Beneficiary
     is the lender, OAO RBC Information Systems.           was approved by the general meeting of
     The deal was approved by the general                  shareholders.
     meeting of shareholders.
                                                      8.      The provision of a loan of 1,300,000 (One
3.       The provision of a loan of 720,000 (Seven         million three hundred thousand) rubles by
     hundred twenty thousand) rubles by the                the Company to OOO RBC Pro, at an annual
     Company to OOO MERKOT, at an annual
                                                           interest rate of 6% (six percent). Beneficiary
     interest rate of 6% (six percent). Beneficiary
                                                           is the lender, OAO RBC Information Systems.
     is the lender, OAO RBC Information Systems.
     The deal was approved by the general                  The deal was approved by the general
     meeting of shareholders.                              meeting of shareholders.

4.       The provision of a loan of 6,500 (six        9.      The provision of a loan of 300,000 (three
     thousand five hundred) rubles by the                  hundred thousand) rubles by the Company
     Company to the National Award Committee
                                                           to OOO SMTP Press, at an annual interest
     Autonomous Non-Profit Organization, at
                                                           rate of 6% (six percent). Beneficiary is the
     an annual interest rate of 6% (six percent).
     Beneficiary is the lender, OAO RBC                    lender, OAO RBC Information Systems. The
     Information Systems. The deal was approved            deal was approved by the general meeting
     by the general meeting of shareholders.               of shareholders.
10. The provision of a loan of 11,000,000
  (eleven million) rubles by the Company to
  OOO SMTP Press, at an annual interest rate
  of 6% (six percent). Beneficiary is the lender,
  OAO RBC Information Systems. The deal
  was approved by the general meeting of
  shareholders.
11. The provision of a loan of 3,000,000
  (three million) rubles by the Company to
  OOO SMTP Press, at an annual interest rate
  of 6% (six percent). Beneficiary is the lender,
  OAO RBC Information Systems. The deal
  was approved by the general meeting of
  shareholders.
12. The provision of a loan of 10,000,000
  (ten million) rubles by the Company to OOO
  SMTP Press, at an annual interest rate of
  6% (six percent). Beneficiary is the lender,
  OAO RBC Information Systems. The deal
  was approved by the general meeting of
  shareholders.
13. The provision of a loan of 12,000,000
  (twelve million) rubles by the Company to
  OOO SMTP Press, at an annual interest rate
  of 6% (six percent). Beneficiary is the lender,
  OAO RBC Information Systems. The deal
  was approved by the general meeting of
  shareholders.
14. The provision of a loan of 5,000,000 (five
  million) rubles by the Company to OOO
  SMTP Press, at an annual interest rate of
  6% (six percent). Beneficiary is the lender,
  OAO RBC Information Systems. The deal
  was approved by the general meeting of
  shareholders.

								
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